Rangers to Stanley Cup + Clippers’ $2 Billion Price Tag = MSG Rally

The Wall Street Journal

Steven Russolillo

May 29, 2014

Friday is a good day to be a Madison Square Garden Co.MSG -1.06% shareholder.

MSG shares jumped as much as 6.1% on a double dose of good news. The New York Rangers, owned by MSG, advanced to the Stanley Cup Finals Thursday evening for the first time in 20 years. On the same day, the Los Angeles Clippers agreed too be sold for a record $2 billion, which potentially bodes well for the New York Knicks’ future worth. The Knicks are also owned by MSG.

“Band front-man and MSG Executive Chairman James Dolan is probably writing a song this morning about his unbelievable Thursday,” said Don Bilson of Gordon Haskett Research Advisors, an event-driven research company. Two or three extra hockey games at the Garden, combined with potential price bumps and increasing merchandise sales “have the potential to boost MSG short-term and mid-term prospects,” he said.

Then there’s the Clippers. FormerMicrosoft CEO Steve Ballmer reachedan agreement to buy the Clippers for $2 billion with Shelly Sterling. It remains uncertain if her husband and embattled team owner, Donald Sterling, will fight the deal.

As MoneyBeat’s Paul Vigna earlier reported, Mr. Ballmer bid $2 billion for a Clippers franchise that Forbes estimated was worth $575 million. That’s also almost quadruple the previous record $550 million price tag the Milwaukee Bucks fetched last month.

So, what do the Clippers and the Bucks have to do with the Knicks and MSG?

“The premium says the market for premier sports assets in large sports markets is robust,” said Rich Tullo, director of research at Albert Fried & Co. He estimates the Knicks are “intrinsically worth” as much as 50% more than the Clippers. “In our view, the intrinsic values of MSG’s hard assets are worth about $6 billion,” he said. MSG has a market cap of about $4.1 billion, according to FactSet.

MSG recently rose 3% to $64.71. The stock is up for an 11th straight day, gaining more than 7% throughout the stretch which has coincided with the Rangers playoff run. It is the longest such streak since MSG was spun off from Cablevision Systems Corp.CVC +0.29% four years ago.